Company debt advice for limited company contractors and self-employed professionals

To safeguard your business from increasing expenses and constantly shifting laws like IR35, it’s essential to grasp formal insolvency methods. These procedures can aid in either rescuing or shutting down your PSC (personal service company). Examples include Company Voluntary Arrangement (CVA), Company Administration, or Creditors’ Voluntary Liquidation (CVL).

A Guide to Rescue, Recovery, and Closure Options for Self-Employed Companies

5 million self-employed individuals are adding more than £300 billion to the economy and accounting for 15.3% of UK employment. With businesses aiming to reduce costs and discontinuing the engagement of PSCs (limited companies) and contractors because of the IR35 reform, finding contracts is becoming increasingly difficult.

If you’re thinking about shutting down your limited company or contracting business because of economic and regulatory uncertainties, it’s crucial to comprehend the various options available to you and your business.

Winding Up Your Self-Employed, PSC, or Contractor Company Via Liquidation 

If your company is insolvent, lacks the funds to repay creditors, and you’re questioning if operating through a Personal Service Company (PSC) remains suitable, you might want to contemplate placing the company into liquidation. This can be achieved through a director-initiated process called Creditors’ Voluntary Liquidation.

A Creditors’ Voluntary Liquidation (CVL) is a formal insolvency process involving raising funds to repay creditors by selling assets, resolving creditor matters, and concluding the business.

 In a CVL, a licensed insolvency practitioner is appointed as the liquidator, responsible for overseeing the entire process from beginning to end.

In a CVL, you formally instruct the appointment of a licensed insolvency practitioner after deciding to close the business. Creditors are notified and provided with a Statement of Affairs detailing the financial position. The liquidation begins, with the appointed insolvency practitioner as the liquidator, overseeing the sale of company assets to raise funds for creditors.

Following the liquidation process, your company will be removed from the Companies House register. A licensed insolvency practitioner can assist in determining the most suitable liquidation route for your business and evaluate the possibility of successfully rescuing your company.

IR35 Company liquidation 

If you’re considering liquidating your limited company because of the IR35 private sector reform, the choice of route depends on whether your business is solvent or insolvent. If your business is insolvent, a Creditors’ Voluntary Liquidation, as mentioned earlier, might be the best option for you.

If your business is solvent and retains profits exceeding £25,000, opting for a Members’ Voluntary Liquidation (MVL) can provide a cost-effective exit strategy. 

An MVL is a formal procedure designed for solvent companies capable of meeting liabilities in full and resolving outstanding matters with creditors within 12 months. This approach enables you to withdraw funds tax-efficiently and potentially qualify for Business Asset Disposal Relief, if eligible.

Our licensed practitioners are available to assist you and can provide a complimentary consultation to directors of limited companies.

 Whether you’re facing challenges due to the coronavirus pandemic or considering liquidating your business because of the IR35 reform, a member of the Vanguard Insolvency team can offer advice on an appropriate solution.

How Can I Rescue My Self-Employed Business? 

If your business is potentially rescuable, a Company Voluntary Arrangement (CVA) can assist in negotiating a legally binding repayment plan with creditors, usually spanning a 3 to 5-year period. 

This formal insolvency process aims to revitalise your insolvent or contingently insolvent business by reducing monthly instalments. If your business is under significant creditor pressure and facing legal action, a CVA can shield your business from such threats.

If your business has viable prospects of survival and possesses asset value, company administration is a formal insolvency procedure that can be overseen by a licensed insolvency practitioner.

If your limited company is facing creditor pressure and impending legal action, the moratorium offered by company administration can protect the company from additional litigation while a recovery plan is devised.

Company administration frequently prevents a business from compulsory liquidation, safeguarding viable aspects of the business and protecting employees. Your appointed insolvency practitioner will act as the company administrator, responsible for managing the business’s affairs and guiding the sale of assets to generate funds to repay creditors to the greatest extent feasible.

Alternatively, if your self-employed limited company needs a financial boost to facilitate growth, expansion, and reach new heights, commercial finance can alleviate cash flow constraints. Various finance options are available to safeguard your business’s financial position and broaden its service offering.

Invoice finance can release funds tied up in invoices awaiting payment for fulfilled services, reducing the waiting period between contracts and bridging the cash flow gap. If you require investment in machinery, equipment, or tools to improve your service, asset finance can finance the purchase, customised to your preferred repayment method.

For instance, a hire purchase enables you to divide the expense of a high-value item into manageable instalments over an extended period, with a final payment transferring asset ownership to your business.

At Vanguard Insolvency, we maintain strong partnerships with more than 50 reputable finance lenders, providing finance options at competitive rates. Reach out to our finance team to receive a quote and guidance on the most suitable form of growth capital for your business.